Thursday, January 30, 2014

Plunge Protectors

Plunge Protectors

Andre Willers
30 Jan 2014
Plunge Protector Teams work by utilizing the zero-sum nature of markets .
Discussion :
1.Zero sum means that every winner must have corresponding losers .
2.But the Wealth of the society grows by about 4% (Baseline) a year for at least 200 years .
3.The Plunge Team uses techniques like hedging , futures , shorts , longs , derivatives , etc .
All the chartisms , Elliot waves , etc , etc are used simply to get a null result .
Much easier than trying to make a profit above baseline . A simple spoiler play .

4.Because they need not make a profit or loss , they are not accountable . But in a delicious paradox , they cannot help but make a profit .
5.They do make a profit of 4% pa (baseline) if they do their job properly .
6.This has become a major source of income to the US Fiscus . About 4% of $17trillion pa ~ $600 bn . An indirect tax , to the detriment of higher growth .
7.Unintended consequences :
7.1 Growth rate decreases . The upward and downward spikes decrease , especially downward ones . More inefficient systems survive . General growth rate goes down .
7.2 Members of the Plunge Team defect . See Appendix B.
They know exactly how to use the system for personal profit . This happened in July 2013 .
The system then destabilizes , as the two or more parties go into stabilization-antistabilization loops .
7.3 Getting inside the decision loops :
This war has quietly been going for years , but has now intensified . See Appendix A .
8.Needless to say , some weird things are now happening .
Especially regarding Log-periodic frequencies .
9.Will Greed or Social Responsibility win ?
Watch the next thrilling episode as they play Casino Monopoly with your money .
“Monitor , monitor on the Wall
Whose computer is fastest of them all ?”

Appendix A

The OODA loop has become an important concept in litigation,[1] business[2] and military strategy. According to Boyd, decision-making occurs in a recurring cycle of observe-orient-decide-act. An entity (whether an individual or an organization) that can process this cycle quickly, observing and reacting to unfolding events more rapidly than an opponent, can thereby "get inside" the opponent's decision cycle and gain the advantage. Frans Osinga argues that Boyd's own views on the OODA loop are much deeper, richer, and more comprehensive than the common interpretation of the 'rapid OODA loop' idea.[3]

Appendix B

Former Head Of Plunge Protection Team Lands At DE Shaw
Tyler Durden's picture
Submitted by Tyler Durden on 03/07/2013 12:08 -0400

Brian Sack, he who held the fattest finger on the Fed's green buy button until Simon Potter and his young protege Kevin Henry stepped into those prodigious shoes, has landed a role at mega quant fund D.E.Shaw. As Reuters reports, the former head of the Fed's Market Group will be the co-Director of Global Economics. The fund, with its reputation for mathematical modeling and computer-driven trading over short-term horizons will, we are sure, benefit from Sack's empirical ability to stomp on the throat of the VIX and tinker with VWAPs, though we hope he lasts longer than Larry Summers did. Of course, this almost guarantees that former-D.E.Shaw alum Jeff Bezos' share price will continue to surge as its fundamental performance plunges. The Plunge Protection Team, it appears, is in strong demand, though we hope someone explains that maybe D.E.Shaw does have a MtM policy (and not unlimited balance sheet).
Via Reuters,
D.E. Shaw & Co, a $28 billion hedge fund firm, known for its quantitative modeling, has hired a former top official from the Federal Reserve Bank and an economist from a rival hedge fund, to work in its macro investing unit, the firm said on Thursday.

Brian Sack, had been an advisor to the president of the Federal Reserve Bank of New York and prior to that headed the bank'sMarkets Group.


"Our macro team casts a wide net in terms of asset class and geography, and having these two talented individuals' insights strengthens our capabilities in several dimensions as we source and analyze trades in global markets,"


Founded in 1988 by David Shaw, a computer scientist, the firm now ranks as one of the world's most powerful hedge funds and relies heavily on mathematicians and scientists to create its investment strategies. For a time, the firm employed Lawrence Summers, a former Treasury Secretary, Harvard University President and economist, as an adviser.

As much as mathematical models are critical to the firm's success, less than half of its assets are now managed under computer-driven models with short time horizons. Last year, for example, Stone discussed that one of the big bets in its macro strategy centered around Japan and that these types of bets often take a long time to play out.


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